Hawai‘i may be crawling its way out of a recession already, according to an optimistic forecast from the University of Hawai‘i.
The University of Hawai‘i Economic Research Organization published Friday a report predicting the state’s economic outlook for the first quarter of 2026. And, despite previous UHERO reports about the state’s shaky economy, this latest paper suggests that the latest recession may be moving into the rear-view mirror.
According to the report, while the number of visitor arrivals in the state has declined through 2025 and into 2026, the amount of money spent by visitors has increased. The report estimated that, on average, visitors were spending $270 each day in the last quarter of 2025, the highest rate in a decade, which suggests that higher-end tourists are bolstering the visitor economy.
On the other hand, adjusting for inflation, visitor expenditures are still below the state’s highest historical peaks: in Feb. 2001, the average visitor was spending the equivalent of $367 in 2026 dollars each day, and more than $400 per day in 1991.
UH professor Steven Bond-Smith said Thursday that international visitor rates remain weak, which limits the tourism industry’s overall growth trajectory. However, he said that first-time visitor rates from Japan are approaching pre-pandemic ratios — about 32% of all Japanese visitors — which the report frames as an opportunity to attract a younger, more budget-conscious generation of Japanese tourist.
Bond-Smith said UHERO predicts this state of affairs won’t continue long-term. Rather, he said, visitor spending is expected to gradually decline while visitor rates continue to recover, although the report doesn’t anticipate a substantial recovery in arrivals until 2027.
Meanwhile, beyond tourism, UHERO expects that the year will end with more new jobs than it began, an improvement from last year, when available jobs dwindled and layoffs, particularly in federal positions, were common.
UHERO Executive Director Carl Bonham said 2025 saw a monthly average of only 15,000 net jobs created across the entire nation — “basically nothing,” he said. But preliminary estimates for January alone saw about 130,000 new jobs.
In Hawai‘i, UHERO predicts modest job growth over the next several years: a 0.2% increase in non-farm jobs both this year and in 2027, and a 0.3% increase in 2028. At this rate, the report estimates the year will end with approximately 644,000 non-farm jobs — an increase of about 100,000 from last year — which will rise to 647,000 by the end of 2028.
However, Bond-Smith and Bonham said all of these cautiously optimistic predictions hinge on a still-volatile political situation. After the U.S. Supreme Court ruled this month that President Donald Trump’s wide-ranging tariffs are not constitutional, Bonham said there will, presumably, be some sort of impact to tourism and the economy. What that impact is, however, is difficult to say.
“I think we’ll know what the impact is the same time you do,” Bonham told reporters Thursday.
At the same time, Bonham said weak visitor rates from Canada — which were reduced by about 10% following the Lahaina wildfires and haven’t really recovered since — might be in a better spot now “if we weren’t talking about making Canada the 51st state.”
The report speculates that “sometimes vehement negative reactions abroad” to Trump’s policies and rhetoric could be slowing recovery rates, but doesn’t quantify this possibility.
“While it seems unlikely that the U.S. standing in the world will improve in the near-term, we suppose anything is possible,” the report reads.
UHERO’s report concludes that the long-term prospects for Hawai‘i's economy remain unclear as residents continue to leave the state for more affordable pastures and as the potential impacts of widespread AI investment and adoption are felt. But nonetheless, the report repeatedly notes that its forecast is much more rosy than its previous outlook, which predicted a net loss of jobs in the state this year.
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